COVID-19 saw a huge boom in borrowing as many firms turned to the government for financial aid. Since then, debt numbers have been falling, with the latest findings from international paytech, Ebury revealing that firms decreased their debt by £4.4billion across 2024. However, the downward trend in debt figures might be coming to an end as the findings revealed that for the first time since 2020, there was at a quarterly uptick in outstanding payments in Q4’24.
The findings were presented in Ebury’s SME Borrowing Tracker, analysing data from the Bank of England. Following the significant ‘debt pile’ that was accumulated during the pandemic, which saw net loans of £47.3billion issued, the Bank of England hiked interest rates in 2022. Consequently, the cost of borrowing surged, leading to many SMEs looking to minimise their debt exposure.
Since then, debt has been falling. Between 31 December 2023 and 31 December 2024, SME debt fell by a net sum of £4.4billion, from £175.4billion to £171.9billion. When compared to the total outstanding amount at the close of 2020 (£202.1 billion), current debt levels are now 17 per cent or £33 billion fewer.
Outstanding payments on the rise
The last three months of 2024 tell a different story. The amount of outstanding loans shows that SMEs are once again seeking out credit to invest and support their growth ambitions. It also points to improved confidence among lenders, with appetite for lending improving, particularly among challenger and specialist banks.
Phil Monkhouse, UK country manager at Ebury commented: “The Bank of England’s 50 basis points of rate cuts in 2024 have eased borrowing costs, giving SMEs some relief and renewed confidence that rates are moving in the right direction – encouraging many to access credit and re-invest in their businesses to accelerate their growth plans.
“But challenges remain. Many SMEs are still managing high debt repayments after years of rising costs and economic uncertainty, with many still repaying the significant debt accumulated during the pandemic. Unlike larger corporates, they have tighter margins and fewer buffers against shocks, making financial resilience critical.
“With Trump’s protectionist policies threatening operational costs and the UK’s own growth outlook on shaky ground, there could be more instability on the way. In this environment, SMEs must remain adaptable—ensuring they have nimble hedging strategies, seamless access to finance, and the right financial tools to protect against volatility and seize opportunities as they emerge.”
Understanding the surge in COVID loans
The majority of SME lending during the pandemic was provided through the government-backed Coronavirus Business Interruption Loan Scheme (CBILS) schemes, of which Ebury was an accredited lender. The Government’s own figures show that £25.9billion was loaned out to around 100,000 firms under the CBILS scheme – under a third (30 per cent) of CBILS facilities have been repaid.
That business support was launched amid a broader package of help including additional loans, the Bounce Back Loan Scheme, capital repayment holidays, extended overdrafts and asset-based finance.
